Insurance Regulatory and Development Authority

Sub: Removal of controls on pricing of risks in general insurance business with effect from 1st January, 2008

The issues relating to the removal of controls on pricing of risks in the general insurance business was discussed at a meeting with the CEOs of general insurers at Hyderabad on 14 December 2007 .

It was clarified by the Authority at the meeting that the Guidelines on File and Use procedures in respect of general insurance products as detailed in the Authority’s circular no. 021/IRDA/F&U/Sep-06 dated 28 th September 2006 will continue to apply and insurers shall continue to file the rates and terms that they wish to offer for various products including the products covered by the erstwhile tariffs. The CEOs assured the Authority that the high standards of underwriting and market conduct will be maintained by all insurers even after the price controls are removed.

On the basis of these assurances, the Authority has decided as follows:

Except for Motor Third Party risks, for all other new insurances and renewals effective on or after 1 January 2008 , insurers shall be free to quote rates of premium in accordance with the rate schedules and rating guidelines that have been filed with the Authority.
The premium rates for Motor Third Party risks will continue to be regulated by the Authority.
Risks qualifying as large risks under paragraph 19(v) of the circular no. 021/IRDA/F&U/Sep-06 dated 28 th September 2006 shall be insured at the rates, terms and conditions and basis of insurance exactly as the rates, terms etc. as developed from the reinsurers with no variation.
Insurers may file a fresh schedule of rates and rating guidelines with the Authority or may maintain the schedules and rating guidelines that have already been filed.
The requirements of the circular no. 021/IRDA/F&U/Sep-06 dated 28 th September 2006 with regard to the filing of products and rates schedules and rating guides and manuals shall continue to apply as amended from time to time.
The Authority will accept the rate schedules and rating guides as filed by the insurer on the stipulation that these are in compliance with the underwriting policy as approved by the respective Boards of Directors and on the condition that they are designed so as to produce an operating ratio [incurred claims plus commission and expenses of management] not exceeding 100% on a gross underwriting basis. However, the Authority retains the right to query or require changes to any such rates schedules and rating guides, at its sole discretion.
Any revision in rates shall only be given effect to on renewal date of the insurance and insurers shall not be permitted to cancel existing insurances and replace them by new insurances at revised rates. The insured has, however, the right to require cancellation of his insurance in which case, premium at short period scale as applicable shall be chargeable.
The terms & conditions of cover and the wordings of policies, endorsements, warranties and clauses set out in the erstwhile tariffs shall continue to apply until fresh market wordings are examined and accepted by the Authority after considering the views of various stakeholders.

(C.S.Rao)
Chairman